IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v29y1994i03p481-497_00.html
   My bibliography  Save this article

Shareholder Wealth Effects of Directors' Liability Limitation Provisions

Author

Listed:
  • Brook, Yaron
  • Rao, Ramesh K. S.

Abstract

The adoption of liability limitation provisions (LLPs) is associated with insignificant stock price reactions for all firms, but with positive stock price reactions for poorly performing firms. This result is consistent with the hypothesis that the net benefit of LLPs is larger for financially troubled firms than for other firms because outside directors are valuable to the distressed firm and LLPs substantially affect experts' expected costs of serving as directors of troubled firms.

Suggested Citation

  • Brook, Yaron & Rao, Ramesh K. S., 1994. "Shareholder Wealth Effects of Directors' Liability Limitation Provisions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(3), pages 481-497, September.
    • Handle: RePEc:cup:jfinqa:v:29:y:1994:i:03:p:481-497_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0022109000009042/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Danielson, Morris G. & Karpoff, Jonathan M., 1998. "On the uses of corporate governance provisions," Journal of Corporate Finance, Elsevier, vol. 4(4), pages 347-371, December.
    2. Aguir, Iness & Burns, Natasha & Mansi, Sattar A. & Wald, John K., 2014. "Liability protection, director compensation, and incentives," Journal of Financial Intermediation, Elsevier, vol. 23(4), pages 570-589.
    3. Wang, Yuwei & Chen, Chia-wei, 2016. "Directors' and officers' liability insurance and the sensitivity of directors' compensation to firm performance," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 286-297.
    4. Yaniv Grinstein & Stefano Rossi, 2016. "Good Monitoring, Bad Monitoring," Review of Finance, European Finance Association, vol. 20(5), pages 1719-1768.
    5. Chang, Shih-Chung & Ren, Yayuan & Yeh, Jason, 2018. "The role of information: When is Directors’ and Officers’ insurance value-added?," Journal of Banking & Finance, Elsevier, vol. 97(C), pages 189-197.
    6. Lin, Chen & Officer, Micah S. & Schmid, Thomas & Zou, Hong, 2019. "Is skin in the game a game changer? Evidence from mandatory changes of D&O insurance policies," Journal of Accounting and Economics, Elsevier, vol. 68(1).
    7. Keldon Bauer, 2009. "Conflicts Of Interest On The Board Of Directors Of Non‐Profit Hospitals: Theory And Evidence," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 80(3), pages 469-497, September.
    8. M. Martin Boyer, 2003. "Is the Demand for Corporate Insurance a Habit? Evidence from Directors' and Officers' Insurance," CIRANO Working Papers 2003s-42, CIRANO.
    9. M. Martin Boyer, 2004. "Is the Demand for Corporate Insurance a Habit? Evidence of Organizational Inertia from Directors' and Officers' Insurance," CIRANO Working Papers 2004s-33, CIRANO.
    10. Boyer, Martin, 2014. "Directors’ and officers’ insurance and shareholder protection," Journal of Financial Perspectives, EY Global FS Institute, vol. 2(1), pages 107-128.
    11. Aguir, Iness & Aguir, Wael, 2020. "Director and officer liability protection and firm value: Unintended consequences," Finance Research Letters, Elsevier, vol. 32(C).
    12. M. Andrew Fields & Phyllis Y. Keys, 2003. "The Emergence of Corporate Governance from Wall St. to Main St.: Outside Directors, Board Diversity, Earnings Management, and Managerial Incentives to Bear Risk," The Financial Review, Eastern Finance Association, vol. 38(1), pages 1-24, February.
    13. Chia-Chung Chan & Yung-Ho Chang & Chia-wei Chen & Yuwei Wang, 2019. "Directors’ liability insurance and investment-cash flow sensitivity," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(1), pages 27-43, January.
    14. Li, Tianshi & Yang, Tina & Zhu, Jigao, 2022. "Directors’ and officers’ liability insurance: Evidence from independent directors’ voting," Journal of Banking & Finance, Elsevier, vol. 138(C).
    15. Zou, Hong & Wong, Sonia & Shum, Clement & Xiong, Jun & Yan, Jun, 2008. "Controlling-minority shareholder incentive conflicts and directors' and officers' liability insurance: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2636-2645, December.
    16. Park, Min, 2018. "What drives corporate insurance demand? Evidence from directors' and officers' liability insurance in Korea," Journal of Corporate Finance, Elsevier, vol. 51(C), pages 235-257.
    17. Bradley, Michael & Chen, Dong, 2011. "Corporate governance and the cost of debt: Evidence from director limited liability and indemnification provisions," Journal of Corporate Finance, Elsevier, vol. 17(1), pages 83-107, February.
    18. Agrawal, Vipin & Kothare, Meeta & Rao, Ramesh K. S. & Wadhwa, Pavan, 2004. "Bid-ask spreads, informed investors, and the firm's financial condition," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(1), pages 58-76, February.
    19. M. Martin Boyer & Amandine Hanon, 2009. "Protecting Directors and Officers from Liability Arising from Aggressive Earnings Management," CIRANO Working Papers 2009s-35, CIRANO.
    20. Guan, Yuyan & Zhang, Liandong & Zheng, Liu & Zou, Hong, 2021. "Managerial liability and corporate innovation: Evidence from a legal shock," Journal of Corporate Finance, Elsevier, vol. 69(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:29:y:1994:i:03:p:481-497_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.